Education in India is way more expensive now than it was some 5 years ago. Inflation in the economy has a larger part to play in it. Rising tuition fees, increased cost of accommodation, etc. have together contributed to this steep rise.
India looks to attain an all-time-high Gross Enrolment Ratio of 30% within the next year and the dream is quite close to reality. Only the US and China hold a better GER. As India marches along to become the strongest economy in the world, education is imperative to this vision.
Higher education from renowned private and Government institutes has been made more accessible to aspirants but at steeper prices. The total expenditure involved in acquiring specialized degrees in fields such as engineering, management, etc. have reached the sky. External financing is probably the only option left for the parents and their inspiring children to cover such expenses.
A secured education loan in India is one of the funding options that help parents meet such high expenses and enroll their children in the right institute. The low rate of interest and prolonged tenors are two features which make these loans affordable.
You can also avail income tax benefits on your loan against property interest paid under Section 80E. There is no limit on the deductions that you can claim. However, the tax benefits are only available for 8 years.
These features ease out your education loan repayment. You can also keep the following points in mind to ensure you never miss out on your EMIs.
- Opt For A Suitable Tenor
Loans against the property for education come with tenors for up to 20 years. Choosing a longer tenor makes your EMIs affordable and helps you pay them without straining your monthly budget. However, do note that such tenors will also increase the total interest payable.
For example, your EMIs will be Rs. 36,000 (approx.) with a property loan for education in India of Rs. 30 Lakh at a 12% rate of interest for 15 years. The EMIs will increase to Rs. 43,000 (approx.) if the tenor becomes 10 years.
Similarly, the cost of a loan is around Rs. 64 Lakh in the first case, which reduces to about Rs. 51 Lakh in the second case.
- Part-prepay When You Have Additional Funds
Part-prepayment is when you pay a portion of your outstanding principal that is more than the value of a single EMI. Prepayment either reduces the loan tenor or the EMIs. Part-prepaying once in a year is an effective way to repay your loan quickly.
Part-prepaying the outstanding principal of your education loan also increases your CIBIL score.
- Transfer The Balance To Avail Lower Interest Rates
Balance transfer facility enables you to transfer the outstanding balance of your education loan in India to another financial institution. Borrowers avail of this facility when another lender offers a lower rate of interest.
Be advised that the new lender may charge a processing fee against this facility. Calculate your savings on the outgoing interests and only transfer the balance if your savings is more than the fees charged.
These were some ways to repay your loan against property for education with ease. It is also recommendable to foreclose the loan when you have the necessary funds.
Foreclosing and Its Benefits
Foreclosing means to repay the entire outstanding balance of your loan before the tenor ends. The primary benefit of this facility is that you save considerably on the total interest payable.
The interest component in EMIs is way higher than the principal during the early years of your loan tenor. Hence, timing your foreclosure is essential to gain the maximum benefits.
The EMI amount on your education loan in India remains fixed. However, the interest and principal portion differ within the EMI. Interests constitute the lion’s share during the early phases of repayment which gradually decreases with time. The principal portion in EMIs follows the exact opposite pattern. If you chose to foreclose a loan during the initial years, you may not be a gainer as by then, principal repayment through EMIs has been minimal. To foreclose, you need to pay an amount similar to the actual loan value as majority part of your repayments have been towards the interest accrued. An Education loan calculator can be used for calculating the EMI amount.
Hence, choosing the right time for pre-closure of loan is vital. Additionally, you must keep an eye on the fees charged by lenders for these facilities while availing the loan.
NBFCs like Bajaj Finserv provide both foreclosing and part-prepayment facilities without any additional charges if you are paying on a floating rate of interest.
Bajaj Finserv also brings you pre-approved offers that help you save time by making the process of availing loans simplistic. Pre-approved offers are available on secured credits like home loans, unsecured loans like business loans, personal loans, and an array of other financial products.
Abiding by these above points can help you repay your loan faster. Make sure to check the education loan details before you apply.
